Three CD account mistakes savers should avoid this September

Certificates of deposit can offer fixed returns and protection for savers’ principal, but they can also become costly when customers choose the wrong account or need their money early.

One risk involves opening a CD before the Federal Reserve’s September meeting concludes on Sept. 16. The article says the likelihood of a rate hike stood above 60%, according to CME Group’s FedWatch tool, and advises savers to compare lenders now before deciding whether to wait for potentially higher rates.

Banks do not necessarily change CD rates by the same amount as the Federal Reserve, but they often take direction from the central bank. Savers can therefore use the time before the meeting to identify which institutions offer competitive terms.

The article also warns against choosing a short-term CD when long-term accounts currently offer noticeably higher interest rates. Even a 25-basis-point difference between terms could affect returns. Customers should also remember that withdrawing funds before maturity can bring an early-withdrawal penalty, potentially wiping out interest earned on the deposit.